Capital Allowances

 Capital  Allowances  –  Claim  it  or  Lose  it

From the 1st of April 2014 capital allowances should be claimed on commercial property by any tax payer upon acquisition.

Only commercial properties are eligible. When buying such a  property, typically there would be fixtures and fittings in it, such as items which are part of the plumbing and electrical installations. It may be an industrial property that has machinery, or a hotel that may be sold with all the furniture and kitchen facilities. These items are likely to be needing replacement at some point and as such would qualify for capital allowances.

This form of tax relief unfortunately is not available on residential properties. Commercial properties which are eligible could be: factories, shops, hotels, industrial warehouses, showrooms or other business premises. It can also be claimed on development and construction projects.

Under the new legislation, it can also only be claimed when buying or selling and if not claimed at the right time, the right to claim in the future could be lost forever.

Under these new legislation rules from 1 April 2014 whether buying or selling,  any unclaimed relief for capital allowances may be lost forever, for themselves and any subsequent purchasers of the property.

It is therefore vital that when considering an acquisition of commercial property, full history of the capital allowances claimed on it, is obtained as part of the due diligence. Capital allowances can not be claimed at a later date. It must therefore be agreed between the parties, helping buyers claim the maximum relief and sellers extract the optimal price.

If you are a non-taxpayer, such as a charity or a pension fund purchasing a commercial property, the capital allowances relief may not be available. However, it is important that steps are taken to preserve the position for future buyers as it will increase the value of the property.

When purchasing a commercial lease at a premium, the right ordinarily will remain with the landlord unless otherwise negotiated. However, the purchaser of the lease would be able to claim relief for improvements which they made to the property, which involved fittings or fixtures.

Whether you are buying, selling, or leasing a commercial property, it is vital that you get professional advise at an early stage. Joe Harp will be happy to assist with any inquiries at: joe.harp@hcls.com